Judge says Trump sued IRS for 'improper purpose'; refers his lawyer to bar

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A Florida federal judge in a scathing order Monday said President Donald Trump filed a $10 billion lawsuit against the Internal Revenue Service "for an improper purpose" — to gain the appearance of "judicial legitimacy" for a controversial settlement with the Department of Justice.

That settlement in May briefly led the DOJ to create a since-abandoned $1.8 billion "lawfare" fund to compensate purported victims of prosecutorial overreach by the department.

Judge Kathleen Williams, in her new order in U.S. District Court in Miami on Monday, referred Trump's lawyer in the lawsuit, Alejandro Brito, to the Florida bar for consideration of whether Brito should be disciplined in light of her findings.

And Williams ordered a copy of the order to be sent to the New York State Bar, of which Acting Attorney General Todd Blanche is a member, as well as to the District of Columbia Bar, of which Associate Attorney General Stanley Woodward is a member.

Blanche, who is Trump's former criminal defense lawyer, was responsible for signing off on the settlement with Trump on behalf of the IRS. Trump has nominated Blanche to serve as attorney general. The Senate Judiciary Committee is due to hold hearings on Blanche's nomination on Wednesday and Thursday.

Williams barred Trump, the DOJ and other parties in the case from using "the purported 'settlement agreement' " in judicial or other proceedings as evidence of a settlement of the lawsuit.

The settlement included a provision that protected Trump, his family members and related business entities from audits and enforcement actions related to tax returns they filed before the settlement was reached.

Williams' order suggests that Trump no longer has such protection if the IRS takes action against him in the future over those returns. The IRS is unlikely to take such action while Trump is still president. His term expires in January 2029.

The order also implies that the DOJ cannot resurrect its $1.8 billion fund, which was quickly abandoned after blowback by members of Congress over concerns it would be used to compensate people who attacked the U.S. Capitol and police there during the Jan. 6, 2021, riot by Trump supporters.

A federal judge in Virginia on June 25 said that a lawsuit challenging the fund could proceed, citing the fact that the DOJ has refused to confirm in writing that the fund is dead.

Williams' order came in response to a brief filed by 35 former judges calling on her to reopen the case, which Trump and the IRS settled before Williams could rule on the question of whether the parties were actually adverse to each other given Trump's position as president and head of the executive branch of government, which includes the IRS.

"The court's opinion is a resounding victory for the rule of law," said the lawyers who represented the judges, Norm Eisen and Matt Platkin, in a statement.

"We are proud to represent these former judges in presenting the arguments that the court adopted," the attorneys said.

A spokesman for Trump's legal team, which includes Brito, in a statement responding to the order, said, "The IRS wrongly allowed a rogue, politically-motivated employee to leak private and confidential information about President Trump, his family, and the Trump Organization to the New York Times, ProPublica and other left-wing news outlets, which was then illegally released to millions of people."

"President Trump continues to hold those who wrong America and Americans accountable," the spokesman said.

The White House declined to comment to MS NOW, referring questions to the Trump legal team spokesman.

CNBC has requested comment from the DOJ.